Vicki M. Young and Glenn Taylor
Mon, August 14, 2023
Something happened at the end of December that sparked major mudslinging between bankrupt Yellow Corp. and the International Brotherhood of Teamsters union.
Bad blood seemed to be simmering below the surface in the years before Yellow’s bankruptcy.
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Yellow’s chief restructuring officer Matthew A. Doheny, in a bankruptcy court document filing, accused the Teamsters and senior union leadership of blocking the less-than-truckload (LTL) giant from executing phase two of the critical One Yellow restructuring initiative that would merge its four operating subsidiaries to create one “super-regional carrier.”
Doheny accused Teamsters general-president Sean O’Brien of pulling support for phase two late last year. Doheny further alleged that the required approvals should have been routine since the company had worked with the union through Freight Division Director John Murphy on the plan. One Yellow covered 70 percent of Yellow’s network. Doheny said when O’Brien got involved, the union started stalling on several key issues. Yellow gave the union financial records so members would understand that 30,000 employees—including 22,000 union employees—would be out of work if the second phase didn’t move forward, Doheny said.
Yellow tried to comply with the union’s “serial extra-contractural demands”, hoping it would be enough to move to the next restructuring stage. “But each time Yellow agreed to a union demand, the union demanded more,” Doheny wrote.
O’Brien publicly criticized Yellow and its leadership with social media communications “intended to weaken Yellow.” Doheny even accused O’Brien of using Yellow as a “sacrificial lamb in an apparent attempt to gain leverage” in the union’s then on-going UPS negotiations. Yellow sued the union in June, seeking $137 million in damages. Doheny said the union’s threat of a strike at Yellow caused customers to give their business to trucking rivals. The strike was threatened after Yellow said it was unable to make $50 million in pension and benefits payments.
As the largest unionized LTL carrier in the U.S., Yellow operated service terminals in 300 communities, had employees in every state, and last year hauled 14.2 million shipments—or a daily average of 50,000—for 250,000 customers including the U.S. government. In fact, Doheny said that during stalled talks with the union, Yellow reached out to key political figures including Senator Bernie Sanders (I-Vt.) and former U.S. Secretary of Labor Marty Walsh, as well as members of President Joe Biden’s administration to get the union to return to the negotiating table. He said the Biden administration “encouraged” the union to negotiate, but it declined to do so.
If implemented, One Yellow could have driven “upwards of $675 million in additional annual revenue at operating margins of 13.5 percent,” Doheny said.
Teamsters executives declined comment on Doheny’s claims. A Teamsters spokeswoman referred to a union statement last week following Yellow’s bankruptcy.
“Yellow may try to use the courts to eradicate its financial responsibilities, but they can’t escape the truth. Teamster families sacrificed billion of dollars in wages, benefits, and retirement security to rescue Yellow,” O’Brien said. “The company blew through a $700 million government bailout. But Yellow’s dysfunctional, greedy C-suite failed to take responsibility for squandering all that cash.”
The Paycheck Protection Program bailout gave the U.S. Treasury a 30 percent stake in the trucking firm. Yellow has only paid $230 million of principal owed from the $700 million loan.
In the same statement, Zuckerman said that when “mismanaged companies like Yellow cry about needing more flexibility to modernize, they’re telling you they want to take advantage of workers” by paying less, killing pensions and stop paying benefits. “They want to force workers to perform labor they weren’t hired to do. All things Yellow is outright guilty of,” he added.
Last week, the union urged the federal government to reform corporate bankruptcy laws.
“The freight company’s closure leaves 22,000 union members without work despite Teamsters at Yellow giving back more than $5 billion in wages and benefits since 2009,” the union said. It’s asking Congress and the White House to enact new legislation that would prioritize workers during corporate bankruptcies, citing legal safeguards needed to protect earned pension credit, retirement benefits and the payment of severance owed to workers.
“Corporate bankruptcy legislation in the U.S. is a joke. The rules are written to favor corporations in this country, not working people. We see this with federal labor laws as well with workers fighting an unequal system for more than 400 days to get a union contract. Workers need real relief and protection,” O’Brien said in a statement.
O’Brien charged that “perennially mismanaged companies like Yellow” shouldn’t be able to find a safe harbor from accountability through a bankruptcy filing, adding that hardworking people should be at the front of the line to be paid instead of getting left behind.
The union also demanded that new regulations be put in place so that collective bargaining agreements in place at the time of a bankruptcy filing are honored by any future employers who take over operations. Teamsters General Secretary-Treasurer Fred Zuckerman said in a statement that existing investors or new buyers can purchase bankrupt companies with the intent to restructure them to kill labor contracts.
With the company winding down, Yellow set Aug. 18 as the deadline for potential buyers to show their interest in its assets, with Sept. 30 the deadline to ink a stalking horse agreement. The bid deadline is set for Oct. 15, with Oct. 18 as the tentative auction date.
Yellow has about $39 million in accessible funds, which it said isn’t enough to fund its wind-down. Private equity firm Apollo Global Management, a senior lender to Yellow before it filed its Chapter 11 petition, led an investment group to provide a $142.5 million debtor-in-possession (DIP) financing facility, a move that would have put it ahead of other secured creditors.
It now has as competitors hedge fund MFN Partners, Yellow’s biggest shareholder, and Estes Express Lines hoping to get into the action by offering better terms. Estes had provided term sheets for its offer to loan Yellow $230 million since a hearing held last Wednesday, according to Yellow’s bankruptcy lawyer Patrick Nash.
The next bankruptcy hearing will take place Tuesday. Judge Craig Goldblatt approved $1.5 million in funding to cover two weeks of utility payments for Yellow’s 311 transportation centers, 169 of which the trucking company owns.
In its second quarters earnings report Wednesday, Yellow said it had $1.1 billion of property and equipment after depreciation. Since several LTL companies are looking to capitalize on market share, including FedEx’s Freight division, XPO, Old Dominion, ArcBest and Saia among others, Yellow may be able to sell the terminals for a high price. In June, the company sold off its Compton, Calif. terminal for $79.5 million to help pay its outstanding loan balance.
Yellow’s net losses in the second quarter totaled $14.7 million, and ballooned to $69.3 million in the first half of 2023. Operating revenue fell 20.9 percent in the quarter to $1.13 billion, as companies pulled freight due to concerns of a labor stoppage.
The trucking firm was also sued on Aug. 1 by a former employee in a purported class-action lawsuit accusing Yellow of violating federal law and California and New Jersey state laws for not providing sufficient notice in connection with mass employee layoffs. Yellow shut down operations on July 30, but didn’t file for bankruptcy court protection until Aug. 6. The employee lawsuit is now on hold because of the Chapter 11 filing.
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